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Discussion Starter #1 (Edited)
Hello, I don't really have an investment portfolio yet. I've been doing a lot of research in the last year, mainly to understand what my risk tolerance is and in what assets I should be invested.

One thing I've been trying to figure out is the nitty gritty details of rebalancing.

Lets take an example. I've been looking at how to minimize fees. So, my idea was to open a TDW basic self-directed rrsp account. In this account I would put money into two e-series mutual funds. My trading costs would be nil for this account as there is no fee to purchase e-series mutual funds.

However, there is a fee to purchase other non TDW mutual funds or etfs (35$ commissions, I believe). So, to avoid these fees I was thinking of opening a questrade rrsp account and purchasing etfs for 4.95 a trade.

Now, when it comes time to rebalance how would I do this?

Could I sell off some of the TDW mutual funds from my TDW RRSP and then transfer the proceeds to my questrade rrsp and purchase etfs?

Does this work? Or would it trigger income tax on the money being transferred?

I hope I've explained this properly, any thoughts would be greatly appreciated.

edit- ack, how do I change the title of the thread? It should be "rebalance" not "replance"
 

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Yes, you can do a cash transfer, but you may be charged a fee for this (on the TDW end). You cannot withdraw the cash and recontribute it in the other account. I think you should ask yourself whether its necessary to have both kinds of accounts. If you're going to have a brokerage account, why the TD mutual funds?
 

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Discussion Starter #3 (Edited)
Yes, you can do a cash transfer, but you may be charged a fee for this (on the TDW end). You cannot withdraw the cash and recontribute it in the other account. I think you should ask yourself whether its necessary to have both kinds of accounts. If you're going to have a brokerage account, why the TD mutual funds?
Hi Andrewf, I was thinking of getting the TD mutual funds to reduce transaction costs. There are no transaction costs to purchasing the td funds with a tdw account. I was planning on purchasing them bi-weekly.

Even if I went to all etfs in a brokerage account like questrade, I would still be charged 5 bucks a trade. So, imagine a portfolio split between 4 etfs. If I made 4 trades bi-weekly, that would costs 25 bucks every two weeks or 650 dollars a year. I plan to make contributions of about 5k a year. The transaction costs would be huge compared to my portfolio.

If i made quarterly or annual purchases, it would bring them down...
 

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Hi Andrewf, I was thinking of getting the TD mutual funds to reduce transaction costs. There are no transaction costs to purchasing the td funds with a tdw account. I was planning on purchasing them bi-weekly.

Even if I went to all etfs in a brokerage account like questrade, I would still be charged 5 bucks a trade. So, imagine a portfolio split between 4 etfs. If I made 4 trades bi-weekly, that would costs 25 bucks every two weeks or 650 dollars a year. I plan to make contributions of about 5k a year. The transaction costs would be huge compared to my portfolio.

If i made quarterly or annual purchases, it would bring them down...
If you're going to make regular contributions, you are probably far better off using mutual funds. Canadian Cough Potato blog did some sample calculations a couple of weeks ago showing that even with very few transactions a year most people with small accounts (< $100K) are better off with mutual funds from a fees perspective.

Maybe start with the TD e-series. When your accounts hit over $100K you could consider converting to ETFs. You could still continue to make bi-weekly contributions into your TD e-series and then shift them into your ETFs once a year.
 

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Discussion Starter #5
Thanks PMREdmonton. I did not know that Dan Bortolotti had his own blog now. It looks great and I now have some reading to do. Also, I'll continue to review index fund options offered by td.

There aren't a lot of e-series options (especially for fixed income), but hopefully I can make a decent portfolio out of them.
 

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If you're going to make regular contributions, you are probably far better off using mutual funds. Canadian Cough Potato blog did some sample calculations a couple of weeks ago showing that even with very few transactions a year most people with small accounts (< $100K) are better off with mutual funds from a fees perspective.

Maybe start with the TD e-series. When your accounts hit over $100K you could consider converting to ETFs. You could still continue to make bi-weekly contributions into your TD e-series and then shift them into your ETFs once a year.
I have 60k with ITRADE and all in ETF's. If you rebalance once a year the fees should not be too big, then gain it depends how much you pay for a transaction.
 

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TD e-series requires you to hold for 90 days, or else they'll charge you 2%.

Direct Transfer between TDW RRSP account to Questrade RRSP account will not trigger income tax. BUT you have to file the paper work correctly. google for T2033 Direct Transfer. Do not withdraw cash from TDW RRSP and then contribute to Questrade RRSP.

Some brokerage charge a fee for transfer out, you need to check whether TDW charges anything. On the other hand, Questrade may offer to pay for that fee, also check with them.
 

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Is it necessary to invest every two weeks? You could invest every 3 months and get very similar results. I would also suggest not making a purchase in every security, but buying the ETF(s) that are furthest below the target allocation. Voila. ETF investing for $20-$40 per year in trade costs. Accumulate your biweekly amount in a high interest savings account and transfer once per quarter.
 

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Discussion Starter #9
Is it necessary to invest every two weeks? You could invest every 3 months and get very similar results. I would also suggest not making a purchase in every security, but buying the ETF(s) that are furthest below the target allocation. Voila. ETF investing for $20-$40 per year in trade costs. Accumulate your biweekly amount in a high interest savings account and transfer once per quarter.
Thanks Andrewf and Slacker. Great info.

Andrewf, could you explain the bold part a little? I'm not sure I follow, sorry about that.

Again, thanks for the info.
 

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So, let's say you have four ETFs A,B,C, and D, and your target allocation is 25% each (this is what you rebalance to). So let's say your quarterly purchase is coming up and you need to pick which ETF(s) to purchase. Let's say you have $30 in each of A,B, and C, but only $25 in D (market value). You have $3 to invest. To bring your overall portfolio closer to your target allocation (you're currently at ~26% for A,B,C and 21.7% for D), you invest your entire investible amount $3 in D, bringing your allocation to (25.4% for A,B,C and 23.7% D). If this is close enough to your target allocation for comfort, then that's all you need to do. If any of your individual consistuents are too far above your target allocation, you can choose to trim that position by selling some before making your purchases of below-target ETFs. The idea is that it is not absolutely critical to be exactly at your allocation at all times, but within a tolerance (say +/- 10% of the allocation within your portfolio, ie 2.5 percentage points in my example, or 22.5% to 27.5%). Some empirical research has shown that as long as you rebalance at some point (even just annually), you gain most of the benefit.

You don't need to be a religious dollar-cost-averager, buying a fixed amount of every investment you own every week or two weeks. This is a recipe for high transaction costs without a whole lot of benefit over purchasing much less frequently.
 

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Agreed. ETF's are too expensive if you do weekly or bi-weekly dollar cost averaging. I personally have have switched to using TD e-series for my regular purchases, which has no transaction fees. Then I'll switch them to ETF's once a year. (Note that TD charge you 2% if you hold the e-series for less than 90 days)
 

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Discussion Starter #12
So, let's say you have four ETFs A,B,C, and D, and your target allocation is 25% each (this is what you rebalance to). So let's say your quarterly purchase is coming up and you need to pick which ETF(s) to purchase. Let's say you have $30 in each of A,B, and C, but only $25 in D (market value). You have $3 to invest. To bring your overall portfolio closer to your target allocation (you're currently at ~26% for A,B,C and 21.7% for D), you invest your entire investible amount $3 in D, bringing your allocation to (25.4% for A,B,C and 23.7% D). If this is close enough to your target allocation for comfort, then that's all you need to do. If any of your individual consistuents are too far above your target allocation, you can choose to trim that position by selling some before making your purchases of below-target ETFs. The idea is that it is not absolutely critical to be exactly at your allocation at all times, but within a tolerance (say +/- 10% of the allocation within your portfolio, ie 2.5 percentage points in my example, or 22.5% to 27.5%). Some empirical research has shown that as long as you rebalance at some point (even just annually), you gain most of the benefit.

You don't need to be a religious dollar-cost-averager, buying a fixed amount of every investment you own every week or two weeks. This is a recipe for high transaction costs without a whole lot of benefit over purchasing much less frequently.

Ah, ok. Thanks andrewf. So, you rebalance with new money when you do buy.

I'll have to do more research to figure out just what my costs will be for my target asset allocation before I make a decision. After reading the canadian couch potato blog, I think I might just start with either an ING streetwise fund or TD e-series funds. The annual fee to a td sdrsp account pretty much reduces any savings I would get with the e-series funds low MERs...so I may just keep it simple for the first few years and go with an ING streetwise fund.

To give some perspective, I would be starting with zero assets and contributing about 5k a year.
 

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You could do worse than the ING funds. IIRC the MER is 1% which is not exactly low for index investing. How much is the annual fee for the TD SDRSP?

Given that you are just starting, you could keep it simple with just a single equity ETF and a single bond ETF. For the equity, you can use XIU if you're find with just Canadian exposure for now, or you can look at the Vanguard Total World fund (index of global equities, ~50% US, 45% Int'l, 5% Canadian) which is VT I believe. For the bond ETF, I'd say XSB or CBO would be decent choices for the next little while with low interest rates. You're probably young, so you could always look at just equities until your portfolio is a bit bigger.
 

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Discussion Starter #15
$25/year until the balance is above $25k.
Yes. Its 25 dollars. So, any advantage you gain with TD e-series funds can be lost depending on where you are at in the accumulation stage. New accumulators may not see that many savings over the ING funds.

I think what I will be doing is placing funds into the ING balanced growth fund for three years or so and then revisiting my options.

Thanks everyone for the help and info.

Also, my apologies for the typo in the thread title.
 

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Yes. Its 25 dollars. So, any advantage you gain with TD e-series funds can be lost depending on where you are at in the accumulation stage. New accumulators may not see that many savings over the ING funds.

You'd have to double-check, but I'm pretty sure that fee is for a self-directed Waterhouse account, where you can hold e-series but also trade stocks/ETFs. If you just want mutual funds (including e-series), you can get a TD e-series mutual fund RRSP account for free.
 
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